Delphi Energy Corp. (DEE.TO)

A major holding for him. Management has done a great job of de-levering the company, not issuing a lot of shares and keeping the share count low. Stock has doubled over the last year. Still feels the stock is worth $4+ in the right environment, which is what we are in right now with gas at $4.50. Still has room to run over the next 12 months.

Have done a great job. They have a big core area. Went from air based fracks to water based fracks. Thinks it is getting fully valued at this time. You might get a better buying opportunity in the fall. 10 times cash flow. He just lowered from buy to hold.

Has a high ROE, but it is a little more complex when you are looking at energy companies. Has a great profile in north-western Alberta and the market is starting to recognize that. Production is ramping up and it is all fully funded so there is not a lot of dilution going forward. Primarily a gas story. Well-positioned if gas stays at $4.50, but he could see a nice move upwards in gas in the coming 2-3 years based on lower-than-expected yields on some of the big plays in the US.

Delphi Energy (DEE-T) or Painted Pony (PPY-T)? Doesn’t own either. In terms of natural gas names, he is looking at them potentially having weakness so he wants greater liquidity, meaning larger market as opposed to small caps. Both of these are very good companies. This one has been remarkably successful at improving how they been drilling their wells in an area called Big Stone, where just by a few different tweaks they really unlocked the economics for their drilling wells that are coming on, probably at a function of 3 or 4 times greater than they were 1.5 years ago. There is some uncertainty as to how they fund their growth. Debt has been going up recently.

This has been under-owned institutionally but the wells they have been drilling recently, with new completion techniques, have been boomers. Have some running room here and he feels they can drill up to 100 wells in Big Stone East and they haven’t even cracked Big Stone West yet. An under-owned story. As gas goes higher, you will get some big buyers coming into the story. No dividend.

74% natural gas weighted and only 26% liquids. They have the Montney play with some fabulous wells. Should be doing 8200-8300 BOEs a day. Q3 should be reported any day. Balance sheet is in fair shape. Cash flow should be about $45 million this year. Has a target of $1.80. If you see the stock in the $1.20-$1.30 range, it would be a fabulous buy.

(A Top Pick July 4/12. Up 8.59%.) Loves this company. In the Montne. Good management. Have gone from oil based fracs to water-based fracs. Trading very cheap on the metric side. They should do about $0.28-$0.30 in cash flow so it is pretty cheap on most metrics. It could back off a little bit during the market malaise that he is looking for. Under $1 would be a fabulous buy.

When the price of Nat Gas slipped it didn’t make sense to own the company. Perhaps now they deserve a second look. It is on his watch list. He is neutral because of the gas presence. Watch them and take a look at the liquids content of their big project.

(Top Pick Sep 25/12, Up 16.95%) They believe they can take the company much higher in production. They have figured out how to frack. He likes the company a lot. Buy at a dollar.

(Market Call Minute.) Trading at a rich multiple on production. Relative to their cash flow, they can only afford to drill 5 wells a year.

(Market Call Minute.) 76% weighted to gas and costing $10 million to drill a well and doing cash flow of $40 million a year meaning there are 4 wells they can drill.

Largely a liquids rich play and they get pretty good liquids cuts so they get a lot of condensate which sells at a slight premium to Edmonton light. Stock is down 10% today and thinks we are beginning to see a “trade out of the have-nots” which he would put this company in. Because of its market, he doesn’t think this will be the 1^st company that people will buy. There are better buys out there.

(A Top Pick Sept 25/12. Down 3.39%.) Still likes the story. Involved in the Montney play and have a number of good wells that have come on. Have to sell some assets to get the balance sheet in better condition for the tough times that are coming. Very cheap. Feels it is in a holding pattern between $1 and $1.75. Buy on dips. Take a 2-year time horizon if you own.

(Top Pick Nov 30/11, Down 45.90%) The small cap model has become somewhat obsolete.

(A Top Pick July 4/12. Down 5.46%.) Producing around 8500 BOE’s a day. Company is liquids rich. Has a very big land position in the Montne. Drilled some fabulous wells there that they are just trying to get comfortable with in terms of their production capacity over time and looking at using water-based fracs rather than oil-based to improve the overall numbers. Very cheap trading at a discount to NAV of $4.22 and Book Value of $1.91. (Buy a half weighted position now and take advantage of any market malaise in Nov/Dec to go to full position status on any weakness.)